Can once-trendy Whole Foods stop customers from fleeing its stores?
- Barclays data shows foot traffic at Whole Food has dropped 3%, costing the natural grocer 9 to 14 million annual transactions each with an average size of $30 to $50, according to Grub Street.
- Many consumers are walking away from the natural grocer because of its "whole paycheck" prices. Instead, they're going to stores like Kroger, which have strong organic offerings for less money. Whole Foods posted sales of $15.8 billion in organic and natural food in 2016, while Kroger narrowly topped it at $16 billion.
- Whole Foods created its lower-price, millennial-friendly 365 store chain to compete with conventional supermarkets, but the strategy hasn't made the traction the company had hoped.
Whole Foods has seen store traffic decline for six consecutive quarters, and despite the grocers best efforts, customers continue to migrate toward cheaper, more mainstream supermarket formats.
Some former Whole Foods shoppers now look to Sprouts for their groceries. The upstart natural and organic grocer has seen strong growth recently, reporting a 14% earnings increase over the previous quarter and a 6% increase over the year-ago period in its latest financial report. The company's net sales also reached $986 million in Q4.
By contrast, Whole Foods has seen same-store sales decline 2.4% and revenue rise only 1.9% in the most recent quarter. The grocer's partnership with Dunhumby could bolster store loyalty programs and better target promotions, but it's still on shaky ground. If Albertsons takes over Sprouts, the combined company could leverage the larger chain's strong finances and nationwide reach to grab more of Whole Foods' market share.
Lidl's entry into the U.S. market, scheduled to take place this summer, also could put further pressure on the grocery chain. It will be interesting to see how the store evolves in the face of these growing competitors, and if it can come out on top. For Whole Foods it's evident what worked in the past is no longer a sound strategy in today's grocery space.
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